Section 138 is not attracted when a cheque exceeds the legally enforceable debt at presentation.

The respondent filed a private complaint under Section 200 of the Code of Criminal Procedure alleging an offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”).

The complaint arose from a sale transaction under which the petitioner allegedly issued a cheque for ₹59,71,154.

After the cheque was issued, the petitioner transferred ₹20 lakh to the respondent.

The complaint stated that the remaining liability was approximately ₹39,71,000, and that the parties agreed the cheque could be presented if the petitioner failed to pay the balance, provided the ₹20 lakh was refunded.

The respondent presented the cheque for its full amount without refunding or accounting for that payment; the cheque was returned with the endorsement “Payment Stopped.”

The Magistrate took cognizance on 28 August 2023, and the petitioner sought to quash the proceedings under Section 482 CrPC.

1. Whether presenting the cheque for its full amount, after a part-payment had reduced the legally enforceable liability, attracted Section 138 of the NI Act

2. Whether the proceedings and cognizance order should be quashed under Section 482 CrPC on the basis of the complaint’s own averments

Section 138 of the NI Act applies where a cheque issued in discharge, wholly or partly, of a legally enforceable debt or liability is dishonoured, subject to the statutory conditions.

Under Sections 15 and 56 of the NI Act, a part-payment made after a cheque is drawn may be endorsed on the instrument, which may then be negotiated for the balance.

Relying on *Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel*, (2023) 1 SCC 578, the Court applied the rule that the dishonoured cheque must represent the legally enforceable debt on the date of presentation or maturity; where a part-payment is made after drawing the cheque, the payment must be endorsed, and an unendorsed cheque for the original amount does not attract Section 138 if that amount exceeds the debt then due.

The complaint itself acknowledged the ₹20 lakh payment and stated that the outstanding liability was reduced to approximately ₹39,71,000.

It also disclosed that the respondent presented the cheque for ₹59,71,000 without refunding or accounting for the payment.

Applying *Dashrathbhai*, the Court held that, on the complaint’s own account, the cheque amount exceeded the legally enforceable liability at presentation.

The petitioner’s failure to reply to the statutory notice did not alter that conclusion.

It allowed the petition and quashed the proceedings in C.C. No. 26526/2023, including the Magistrate’s order dated 28 August 2023.